Exxonmobil Oil Corp. v. Black Stone Petroleum Inc.

221 F. Supp. 3d 755, 2016 U.S. Dist. LEXIS 156516, 2016 WL 6649236
CourtDistrict Court, E.D. Virginia
DecidedNovember 9, 2016
DocketCase No. 1:16-cv-148
StatusPublished
Cited by10 cases

This text of 221 F. Supp. 3d 755 (Exxonmobil Oil Corp. v. Black Stone Petroleum Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Exxonmobil Oil Corp. v. Black Stone Petroleum Inc., 221 F. Supp. 3d 755, 2016 U.S. Dist. LEXIS 156516, 2016 WL 6649236 (E.D. Va. 2016).

Opinion

MEMORANDUM OPINION

T.S. Ellis, III, United States District Judge

This diversity breach of contract action arises from a dispute concerning two contracts regarding the sale of a New Jersey service station. The two named defendants did not file an answer to the complaint or otherwise respond or appear in this action, and thus the matter was referred to the Magistrate Judge for a Report and Recommendation (“R&R”) pursuant to 28 U.S.C. § 636(b). The Magistrate Judge’s R&R concluded:

(i) that default judgment should be entered for plaintiff against only one of the named defendants;
(ii) that plaintiff was not the intended beneficiary of the contract between the co-defendants, and thus could not sue for breach of that contract’s provisions; and
(iii) that plaintiff was entitled neither to pre-judgment interest, nor post-judgment interest.

Plaintiff filed timely objections to these recommendations, which are now ripe for disposition. For the reasons that follow,

(i) the objection to the Magistrate Judge’s conclusion that plaintiff is not an intended third party beneficiary of the co-defendants’ contract is sustained;
(ii) the objection to the recommendation against the award of pre-judgment interest is overruled; and
[759]*759(iii) the objection to the recommendation against the award of post-judgment interest is sustained.

Accordingly, the record warrants the entry of judgment against both defendants, jointly and severally, for the amount of contractually-required liquidated damages, plus post-judgment interest at the statutory rate.

I.

Plaintiff ExxonMobil Oil Corporation (“Exxon”) is a New York corporation with its principal place of business in Texas. Exxon is in the business of, inter alia, owning and leasing roadside service stations in the United States. Defendant Black Stone Petroleum, Inc. (“Black Stone”) is both incorporated and headquartered in New Jersey, and was lessee on one of Exxon’s New Jersey service station properties. Defendant FDD Realty, LLC (“FDD Realty”) is a New Jersey limited liability company operating in New Jersey.

On January 27, 2012, Exxon and Black Stone executed a contract (the “Exxon Agreement”) in which Black Stone exercised its right of first refusal to purchase the New Jersey station that Black Stone had previously leased from Exxon. The Exxon Agreement includes the following pertinent provisions:

• Black Stone would pay Exxon a purchase price of $1,274,831 for the service station.
• Exxon would pay $350,000 toward the cost of replacing the underground fuel storage tanks at the station.
• Black Stone would sell Exxon-branded fuel exclusively from the service station’s gas pumps for a period of 15 years following the closing date of the Exxon Agreement.
• In the event Black Stone would fail to sell only Exxon-branded fuel during the 15-year period, Black Stone would be liable to Exxon for liquidated damages as calculated by a formula listed in the Exxon Agreement.
• The liquidated damages formula provides that Black Stone would pay two cents per gallon of fuel multiplied by (i) Black Stone’s base volume of fuel sales,1 and (ii) the amount of time left in the 15-year window. Specifically, the formula is: “($0.02 per gallon) x ( [Black Stonej’s Base Volume) x (15 [minus] the number of years (including any partial year) since the Closing Date).” Am. Compl. Ex. 1 § 4.1.2.
• The Exxon Agreement also includes a choice of law clause, providing that the Exxon Agreement is to be “governed by and construed in accordance with the laws of the Commonwealth of Virginia.” Id. Ex. 1 § 21.11.
• The Exxon Agreement further provides that the exclusive forum for resolving disputes arising from the Exxon Agreement is the Eastern District of Virginia, Alexandria Division or, if federal jurisdiction is unavailable, the Fairfax County, Virginia circuit court.
• Related to the choice of law provision, the Exxon Agreement also requires Exxon and Black Stone “irrevocably [to] submit.. .to the personal jurisdiction of the federal court for the Eastern District of Virginia in Alexandria, Virginia, or, if federal jurisdiction is not available, to the jurisdiction of the Fairfax County Circuit Courts,” and “not [to] attempt to deny or defeat such personal jurisdiction.” Id.

[760]*760Two days before entering the Exxon Agreement, Black Stone, unbeknownst to Exxon, executed a separate agreement with FDD Realty (the “FDD Agreement”) in which Black Stone contracted to convey its interest in the New Jersey service station to FDD Realty. The FDD Agreement includes the following pertinent terms:

• FDD Realty would advance to Black Stone $1,274,831, which was the purchase price for the station as specified in the Exxon Agreement.
• FDD Realty would also pay an additional sum to Black Stone.
• Immediately after the closing date specified in the Exxon Agreement, Black Stone would execute a deed to transfer ownership of the service station to FDD Realty.
• Following transfer of title to the service station to FDD Realty, Black Stone would “vacate the [station] no later than the date the underground storage tank upgrade work [contemplated in the Exxon Agreement] was completed and the upgrade vendor was paid.” Am. Compl. Ex. 2 at 4, § 5(g).
• FDD Realty would “assume each and every obligation and responsibility of [Black Stone] under the Exxon Sale Agreement and Supply Agreement and.. .indemnify and hold [Black Stone] harmless from and against any and all liability, damage, loss, or expenses.. .arising from or related to [FDD Realty’s] breach of said agreement.” Id. Ex. 2 at 5, § 5(o).
• New Jersey law would govern the construction and interpretation of the FDD Agreement.
• FDD Realty’s attorney was authorized to “supervise and manage all work required to finalize” the Exxon Agreement. Id. Ex. 2 at 2.

The closing date of the Exxon Agreement was April 23, 2012. Thereafter, on July 22, 2013, Exxon made the agreed payment of $350,000 toward the cost of replacing the underground storage tanks at the service station. On October 18, 2013, shortly after the storage tanks were replaced, Black Stone rebranded the station as a “Raceway” service station and ceased selling Exxon-branded fuel, in violation of the Exxon Agreement.2 In response, Exxon demanded that Black Stone pay liquidated damages pursuant to the Exxon Agreement. Black Stone rejected this demand, and instead directed Exxon to collect any liquidated damages due from FDD Realty, which also rejected Exxon’s demand.

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221 F. Supp. 3d 755, 2016 U.S. Dist. LEXIS 156516, 2016 WL 6649236, Counsel Stack Legal Research, https://law.counselstack.com/opinion/exxonmobil-oil-corp-v-black-stone-petroleum-inc-vaed-2016.